If you have an IRA located in the United States and are looking to roll the asset over to a foreign bank, chances are you have been working in the U.S. as an expatriate. Expatriates are legal citizens of one country who live and work in another. They are entitled to save toward retirement through qualified retirement plans regulated by the IRS. Because IRAs are given beneficial tax treatments domestically, rolling the asset into a foreign bank can be tricky but is allowable under certain circumstances.
Review the tax structure of your IRA. If you have contributed to a Roth IRA or SIMPLE IRA, you are not eligible to roll these assets into a foreign country's bank retirement program. Traditional IRA plans are allowed by the IRS to be rolled into a foreign program.
Determine if your home country has a tax treaty with the United States that allows this rollover. Review IRS Publication 901 regarding the various tax treaties the United States has with other countries.
Calculate the tax liability. While you are rolling the assets over into a new retirement plan to get tax preference in your home country, you still need to satisfy the domestic IRS tax regulations. Essentially you need to pay your taxes in the United States to help defer or reduce taxes in your home country on these assets. Some countries such as Canada will refund you the standard withholding but not penalties. So if you are under the age of 59-1/2, you may be required to pay 20 percent or more in ordinary taxes on the rollover amount plus the 10 percent tax penalty for under-age distributions.
Determine if rolling the IRA over makes sense for the cost you will pay. If you are under 59-1/2, you may want to leave the asset where it is until you reach this age to avoid penalties. If your home country will reimburse the ordinary taxes, this may be worthwhile. Consult a tax adviser if you are unsure about this.
Open a retirement fund at your home country's bank. In Canada, these are called RRSP accounts. In Australia, they are referred to as superannuitization funds. Contact the bank in your country to open the right type of account that can accept the rollover.
Liquidate the IRA assets by filling out transfer paperwork with your IRA custodian. The custodian will withhold the required taxes on the account balance and send you a check for the remainder.
Deposit the balance into the new bank account in your home country within 60 days of liquidating it from the IRA to prevent further potential U.S. tax liabilities.